Centrepoint Alliance Limited (CAF) Earnings Call Transcript

Good morning, everyone. My name is Georg Chmiel and I'm the Chair of Centrepoint Alliance Limited. On behalf of the Board of Directors, it's my pleasure to welcome you to our Annual General Meeting for 2025. As there is a quorum present, I declare the 2025 Annual General Meeting of Centrepoint Alliance Limited open. Thank you, everyone, for attending today. The technology you are logged on allows shareholders, proxy holders and guests to virtually attend the meeting. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxy holders have the ability to submit questions and vote. Written questions can be submitted at any time. To ask a question select the Q&A icon at the top of the page on the virtual meeting platform, type your question in the text box and then press submit to send. Please note that while you can submit questions from now on, I will not address them until the relevant time of the meeting. And also note that your questions may be moderated or if we receive multiple questions on one topic, amalgamated together. Finally, due to time constraints, we may run out of time to answer all of your questions. If this happens, we will answer them in due course via e-mail or on our website. For those shareholders who wish to ask a verbal question, an audio question facility is available during this meeting. To use this service, please follow the instructions below the broadcast window on the virtual meeting platform and the moderator will facilitate your participation in the meeting at the appropriate time. You will be able to listen to the meeting while waiting to ask your question. Prior to asking your question, please state your name and the name of the shareholder you represent. If you have any questions using this system, please refer to the online meeting guide available at www.computershare.com.au/virtualmeetingguide or contact Computershare on +61 3 9415 4024. I encourage shareholders to submit their questions and/or request to address the meeting as early as possible. I will ask the Company Secretary, Kim Larkin, to act as moderator for the meeting and read out any written questions or advice of any shareholder or proxy holders with verbal questions received via the online platform. We will certainly give our best efforts to answer everyone's questions. Voting today will be conducted by a way of poll on all items of business. In order to provide you with enough time, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of these options. There is no need to hit a submit button or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open. I would now like to introduce to you the directors of the Board, Martin Pretty, Anthony Vogel and Linda Fox, as well as our CEO, John Shuttleworth. Attending from Centrepoint Alliance team is our CFO, Brendon Glass; and the Company Secretary team around Kim Larkin. In addition, we have senior management in attendance as well as the company's auditors, BDO, represented by Tim Aman. BDO will be available to take questions on the audit report later in the meeting, if so required. John and I will now provide a company update prior to commencing the formal business of the meeting. Centrepoint delivered another year of strong growth and record financial results in fiscal year '25, exceeding our guidance and reflecting the success of our growth strategy. The Board is pleased with the company's robust financial position, continued investment in technology and compliance and commitment to sustainable value creation for shareholders. The execution of our strategy is centered on continually enhancing our service offerings for advisers, ensuring we remain responsive to their evolving needs and the broader regulatory environment. We aim to position Centrepoint as a leading provider of advice and business services to financial advice firms across Australia. Over the past 12 months, we've made strong progress delivering our growth strategy. Our licensing business has continued to grow organically, and we see further opportunities ahead. The launch of the IconiQ platform marked a major milestone after several years of development. Our salaried advice business has grown, and we see opportunities to increase the productivity and explore further acquisitions. It's also encouraging to see the investment management business rebound driven by the adoption of the iQ managed account portfolios. Financial services sector is set to evolve further through the integration of artificial intelligence and automation Centrepoint's strong capability in advice technology positions it to well to harness AI, robotics and process automation to boost productivity and strengthen monitoring and supervising and delivering superior outcomes for advisers and their clients. Centrepoint operates in a dynamic and highly regulated environment. The Board and management remain committed to a robust risk management framework with regular reviews to ensure effectiveness. We have also established an ESG Working Group to support the Board's oversight of the environmental, social and governance matters and are preparing for mandatory climate-related disclosures by 1 July 2027. I would like to acknowledge the valuable contributions of my fellow directors. I also want to particularly thank Peter Rollason for his contribution as Director in the past. Peter stepped down from the Board to focus on his other interests. I further acknowledge the leadership of our CEO, John Shuttleworth, and the executive team for their outstanding execution and unwavering commitment. On behalf of the Board, I thank our shareholders for their continued support and our advisers and staff for their dedication and professionalism. We look forward to another year of progress and achievement. I will now pass on to our CEO, John Shuttleworth.

I'd like to acknowledge our Board members and thank all shareholders for joining us today. It's a privilege to address you as Chief Executive Officer at my fourth Annual General Meeting and to share Centrepoint Alliance's progress, strategy and outlook for the year. Centrepoint Alliance continues to deliver sustainable growth and shareholder value through disciplined execution, strategic innovation and market leadership in adviser services. Our financial performance for the year ending 30 June remains strong with the business delivering normalized EBITDA of $10.6 million, up 16% year-on-year. Net profit before tax of $7.3 million, up 30%. Gross revenue of $326 million, up 13%. Final fully franked dividend of $0.0157 (sic) [ $0.0175 ] per share, bringing total FY '25 declared dividends to $0.03 per share. Operational highlights for the year ending 30 June 2025 include market-leading growth in the licensee business with a net increase of 22 authorized reps, now totaling 571 advisers under Centrepoint Alliance licenses. Managed accounts under -- managed accounts, funds under management grew 40% from $303 million to $423 million distributed across 6 investment superannuation platforms. successfully launched an early commercialization of the IconiQ superannuation investment platform with ongoing adviser onboarding and integration with adviser software. The expansion of salaried advice, including the acquisition of Brighter Super's advice review book and transition of 3 advisers to Financial Advice Matters, increasing employed advisers to 22. We've leveraged technology and artificial intelligence to boost adviser efficiency, enhance supervision and reinforce compliance standards and advanced cyber resilience strategy, including enhanced system controls, AI governance policies and progressing with ISO certification for information security management systems. Most pleasing has been the sustained multiyear growth Centrepoint has delivered, underpinned by disciplined execution, strategic acquisitions and effective cost management. EBITDA has increased 212% since FY '21, reaching $10.6 million in FY '25. This reflects our ability to scale earnings through both organic and successful integration of acquisitions. Net revenue has grown 46% over 4 years, now standing at $40.9 million. This growth has been achieved while maintaining a lean operating model. Profit before tax has risen from $1.5 million in FY '21 to $7.3 million in FY '25, a 387% increase. Our cost-to-income ratio has improved from 88% in FY '21 to 74% in FY '25, demonstrating disciplined expense management. Adviser numbers have grown 44% since FY '21, now totaling 1,471 including 571 authorized representatives and 900 self-licensed advisers. This adviser growth has been achieved despite a 19% contraction in the broader advice market, highlighting our competitive strength. As a result of this business performance, Centrepoint Alliance has delivered a total shareholder return of 125% since July 2021. Our share price has increased from $0.22 to $0.39 over 4 years. A total of $0.145 per share has been paid out in dividends amounting to $25.5 million fully franked returned to shareholders. This includes $0.10 ordinary dividends and $0.045 for ordinary dividends. Dividend payments have been consistent and growing, supported by strong available franking credits. The company's disciplined approach has resulted in significant capital returns and enhanced shareholder value. Over the past year, we have made significant progress in executing our 5-pillar strategy, a strategy designed to balance the stability of our core operations within the growth -- with the growth potential of higher market segments. At the heart of the business is our licensee service division. This remains a foundational pillar, a stable cash-generative business that provides essential support to financial advisers across the country. This segment is valued at lower earnings multiples. So our focus is on building scale and efficiency, driving operational leverage, enhancing adviser services and improving profitability through disciplined cost management and technology enablement. At the same time, we are deliberately expanding into adjacent segments of the financial services market that offer stronger earnings potential and that are valued more highly by the market. Investment management and platform services, for example, benefit from scalable business models and recurring revenue streams. These segments command significantly higher valuation multiples, a reflection of their margin profile and growth trajectory. By increasing our exposure to these areas, we are positioning the group for long-term earnings growth and multiple expansion. This strategic diversification is not only about growth, is about reshaping our earnings mix. In the future, as our higher-margin businesses contribute a greater share of group profits, we expect this to be reflected in a rate of our overall valuation. Our aim is to deliver sustainable value creation for shareholders by combining the resilient organic growth of our core fee-for-service business with the earnings potential of our growth pillars. Artificial intelligence is becoming an important consideration across many industries including financial and professional services. These sectors deal with complex processes and large volumes of data making them well-suited to explore how AI can improve efficiency and support their outcomes. At Centrepoint Alliance, we view this as an opportunity to enhance our operations while maintaining strong governance and compliance. As we look ahead, artificial intelligence is increasingly influencing the way we operate at Centrepoint Alliance. While the full impact of AI on our industry remains uncertain, our belief is that it will deliver significant productivity benefits, particularly in areas such as analytics and reporting, monitoring and supervision, the production of advice documentation and streamlining operational processes. Over the past year, we have taken practical steps to embed AI into our business. Our adoption of Microsoft Copilot integrated securely with our Australian cloud tenancy ensures data is stored securely within our domain and not used for model training. Our approach to AI deployment is structured around 3 phases. The first phase is ensuring we have the right AI infrastructure, capability, governance and training. This involves the establishment of policies and AI approval committee and comprehensive staff training to ensure safe and effective use. The second phase is the deployment of AI to enhance business processes for operational efficiency. The focus in this phase is on developing AI agents for audits, advice generation, compliance and customer support. The third phase is the strategic application of this technology where we challenge the current business models in the market we compete and prepare plans to capitalize on how AI will disrupt or create new business opportunities. In summary, while we remain cautious about predicting the long-term transformation AI may bring, we are confident that our current initiatives will deliver tangible benefits for Centrepoint Alliance, our clients and our shareholders. By focusing on productivity, supervision and responsible governance, we are well positioned to harness the opportunities AI presents. Finally, on our outlook, Centrepoint Alliance has a stable core business and clear areas of focus. The licensee business continues to perform in a competitive market, providing consistency for advisers and clients. The salaried advice business offers scope for revenue growth through productivity within the existing adviser base and the potential for additional acquisition. Strategic initiatives are gaining momentum with managed account FUM now at $484 million, up 14% from 30 June and a confirmed transition pipeline for IconiQ of $1 billion. Underlying EBITDA guidance is in the range of $11.5 million to $12 million, reflecting disciplined financial management. In conclusion, Centrepoint Alliance has delivered a strong total shareholder return through disciplined execution of our strategy while growing our capabilities in asset management and platform businesses that command higher market multiples we are building sustainable shareholder value. Our focus on technology and artificial intelligence ensures we are not only performing well today, but also positioning for future growth and industry's leadership. Thank you for your attention. I will now hand back to the Chairman to proceed with the formal business of the meeting.

Thank you, John. Kim, are there any questions in respect of this item of business.

We have 3 questions from shareholders. The first one being from Mark [ Eaglesham ] who asks, over what time frame would you expect the $1 billion IconiQ pipeline to convert?

Yes. Look, it's a good question. Whilst we haven't sort of published a formal sort of forecast in the market, I would say a reasonable time frame is probably around 18 months to 2 years would be the time frame I'd be looking at. We've also had a good look at when we've formed these views of the time frames, the early adoption of Netwealth and HUB24 because a lot of that information is available in Plan for Life. So whilst the industry has changed a bit from institutional banks and where HUB were, we feel that, that is a pretty realistic time frame.

And there was another question, Kim? Yes.

The second question is from shareholder, Gary Croll, who asks, could you please provide an update on Q1 performance? And secondly, the take-up of the IconiQ platform over the last 6 months?

Yes. So look, we don't publish quarterly results. What I would say is we put an earnings guidance out in the market, which I covered off in my update. If there was any variation to that, we would obviously inform the market. So currently, we're tracking to that earnings guidance. On the platform, I'm not going to put actual financial metrics out there around FUM and flows. We will do that at a point in time. But we've been incredibly encouraged because we've had a number of firms and advisers registered for the platform. We've been adding managed accounts to the platform. Some of them have been setting up bespoke portfolios and the larger transitions are from those firms that have actually taken a philosophical decision or an investment philosophy-based decision to move into managed portfolios and working with some of the asset consultants that we have managed accounts on the platform such as Lonsec and Morningstar, and that will transition across. So what we're actually seeing is almost on a weekly basis, we're starting to see these accelerate, particularly those with managed accounts when they're moving the money across. I think these things always take quite a bit of time to get out of the starting gate, but I absolutely believe that they will accelerate into the second half of the year, and we'll hopefully have some numbers to update the market on.

That's the only 2 questions at this time, Georg.

There being no further questions, we will move on to the next item. The notice of meeting has been circulated to all shareholders. So if there's no objection, I shall take the notice of meeting as read. The agenda items for our meeting today are shown on the screen. Where a vote is required on a particular item, the valid proxies received in advance of the meeting for the proposed resolution will be shown on the screen to enable shareholders to view them as each item is considered. These figures may be varied if a shareholder who submitted a proxy vote is attending the meeting today and has revoked their proxy. I will address each resolution and any questions received in respect of each resolution during each item of business. I note that as Chair, I intend to vote undirected proxies held in favor of each resolution, annual financial and other reports. The first item of business is for shareholders to receive and consider the 2025 annual report, which contains the financial statements of the company for the year ended 30 June 2025, together with the directors' statement and report and the auditor's report on these financial statements. The 2025 annual report has been published and was circulated to shareholders who requested a copy and is available on the company's website. I trust everyone has had ample opportunity to consider it. No shareholder vote is required in relation to this item of business. This is an appropriate time to raise any questions on these reports or on our business in general to raise them now. This is also the appropriate time to raise any questions that you may have of the auditor, which are relevant to the conduct of the audit and preparation and content of the audit report. Kim, are there any questions in respect of this item of business.

There are no questions at this time.